A consumer’s perspective

(March 2006) I’m definitely one consumer who wants high-quality product and service for the lowest possible price. But if I see added value in your services, I won’t hesitate to pay up and shut up. Case in point: my fiancé and I are currently paying an interior designer to revamp our kitchen. The fees aren’t what I would call a bargain but that’s the price you pay for custom designs.

So when won’t consumers shut up about fees? Sometimes never, I know. But more often than not, there is a reason. Like when the fees are not in writing. When it’s not apparent what you are getting for the fees. When after a friend refers me to you, your fees have suddenly doubled and not even six months have passed since the referral took place.

When you accuse me and the friend of lying when I point out the fee discrepancy. (I wish I were making this up!) From time to time, the consumer media will interview me about what to look for in an advisor. They often think I will say “avoid commission-based advisors at all costs.”

But I’ve never suggested that. I have advised against going with an advisor who seems to care more about product purchases than your goals — not quite the same thing. But personally, I don’t think it matters if you’re paid by product manufacturers or the client. The former option affects 90% of advisors and they can’t all be so incompetent.

The bigger question is this: Is the advisor ethical or not? There are commission-based advisors who truly care about their clients’ best interests and do lots of work behind the scenes — work they aren’t compensated for. And there are fee-based advisors who do shoddy work. So here’s part of what I will generally advise clients when seeking you out. Look for someone who:

Has a designation. This isn’t to say advisors who don’t have designations are definitely bad advisors. But a designation is a benchmark that shows you’ve taken courses and studied for a period of time in the area of financial planning, investment planning and insurance.

Takes the role seriously. I had lunch with an advisor in Vancouver recently and what impressed me was the passion she displayed for what she does, and how humbled she seemed that people actually wanted “her” to manage their money. “I can’t screw it up for them when they’ve put their faith in me,” she said.

You feel comfortable with. A person’s financial affairs are immensely private and personal. If there’s anything uneasy about the advisor — even if people can’t put their finger on why they feel that way, run!

Acknowledges his errors. No, I’m not talking grave issues but rather small process issues that happen every now and then, such as not following up with information you promised the client. They say the hardest words a person will ever say are, “I’m sorry” or “I screwed up.” Someone who acknowledges the issue, promises to do better (and actually does better!) is a keeper.

Explains how he or she is paid. Bottom line: Candour about fees is what differentiates the professional from the salesperson. For more insight on this, please see my interview on page 14 of the March issue of Advisor’s Edge with Doug Macdonald, a 34-year veteran of our industry, and this year’s recipient of the Career Achievement Award.

Deanne Gage is Editor of Advisor’s Edge, deanne.gage@advisor.rogers.com